What Affects Airline Ticket Prices?

 Sarah Hwang, Walter Payton, Sophomore, Spring 2025

Navigating the prices of airfare tickets can be stressful because there are many factors that buyers must consider before purchasing. Airlines use complex, confidential algorithms to set ticket prices. There are other known factors “...to think about… [like] supply and demand, competitiveness, loyalty, customer engagement,” says Vanessa Krein, the Senior Manager of Loyalty Ancillary Products at United Airlines.    

A primary contributor behind ticket prices is the supply and demand for flights, which is largely dependent on the season. Airlines have an entire revenue management team whose job is to understand historical supply and demand data of flights on all their routes. They know how many tickets have been booked on upcoming flights, and they can see what capacity remains, and adjust prices accordingly. Data from the Bureau of Transportation revealed that “available seat miles [supply] increased from 92 million to 101 million, and total revenue departures [demand] increased from 644,000 to 681,000” (Aviation Business News, 2024). Usually, when supply exceeds demand, as shown above, this leads to lower prices. 

Because airlines operate like normal businesses in a competitive market, we can take clues from other industries. I spoke with Brent Viklund, a Senior Manager of Merchandise Planning at Walgreens. He mentioned that the company will often schedule sales on products before their competitors do. Competition can drive prices down on many products, as competitors will often price match to avoid losing customers. This can also be seen in the airline industry through fare wars.

Loyalty programs can also influence pricing. These programs allow airlines to retain and grow their consumer base. According to Krein, airlines offer many perks, such as seat upgrades, better ticket prices, and free tickets. Many of these perks are extremely popular and drive repeat business. This is very valuable to both the airlines and their customers. “MileagePlus was recently valued at just under $22bn…while United’s… capitalisation is just $10.6bn” (Financial Times, 2020). Loyalty customers can often get better ticket prices and special offers, such as the ability to use a combination of miles and money to pay for trips.

Ultimately, predicting airline ticket prices is difficult. It’s best to be aware of these factors as a traveler.

Work Cited:

• https://www.ft.com/content/1bb94ed9-90de-4f15-aee0-3bf390b0f85e 

• https://www.aviationbusinessnews.com/in-depth/city-insider-the-ripple-effects-of-the-gap-between-supply-and-demand-in-aviation/ 

Interviewees:

Vanessa Krein- Senior Manager of Loyalty Ancillary products-vanessa.krein@united.com

Brent Viklund- Senior Manager of Merchandise Planning